We are looking at becoming carbon neutral by 2050: Neeraj Kanwar, Apollo Tyres

“Also, in the OEM segment, we are seeing, truck commercial segment coming back up, cars are also coming back up, so a pretty positive trend in India currently,” says Neeraj Kanwar, MD, Apollo Tyres.

What is the trend that you are witnessing in the auto sector?
Now we are seeing an uplift in both truck and car given the economy boost that is happening in India. The GDP is expected to be around 6%. So we are seeing freight movement happening. Specifically in truck TBR for us has gone up 18% year on year whereas passenger car has gone up 15% so replacement is back. Also, in the OEM segment, we are seeing, truck commercial segment coming back up, cars are also coming back up, so a pretty positive trend in India currently.

Earlier you had pointed out about sluggishness in key export markets, especially Europe. Have things bottomed out when it comes to other export geographies, especially Europe?
Well, no. Europe is still going through a massive recession. Inflation has started coming down, so that is a good sign. Last quarter or quarter three, the passenger car segment was down 14% but Apollo in Europe was down only 5%. So we did gain market share. Our high focus is in improving our product mix in Europe, so going for the ultra high performance styles, which today institutes nearly 45% of our total pie of the car segment.

I am again very optimistic about Europe, given that we are a very niche player. We are targeting markets where we are less than 2% market share; France, Italy, Spain and UK are the four countries that there is clear focus as far as Apollo in Europe is concerned.

Any timeline that you are working with when can we see recovery in Europe? Are next couple of quarters going to be soft?
I think the demand is going to be sluggish for the next two quarters so first half is going to be tough. But like I said, we are a niche player, we are a small player in Europe, so we get hurt last. Our whole intention is to see how we can get into various new distributions. Russia, Ukraine war has also given us an opportunity because there were close to 10 million passenger car tyres coming in from Russia into Central Europe. So that has been banned from coming in. Since July of 2023 so that gives us a new opportunity to go into that new distribution network.

You are talking about how there are certain key areas where you are looking at making your foray but given the fact you are making investment into new geographies, would it mean that margins will be under pressure? What’s the outlook?
No, I do not think that is going to hit the margins. On the positive side, raw material has come down 6% quarter on quarter so both natural rubber and all our other raw materials have softened out, so EBITDA margins are going to be healthier.

We reported around 14% EBITDA margin in quarter three. I see an upside coming in quarter four also and going forward, I believe the raw material trend is going to remain at this level given our pricing strategy is going to be sustainable. I think our EBITDA margins are going to go up from here.

You did point out that there has been a bit of reduction when it comes to the raw material pricing. So are you passing it on to consumers in terms of price cuts, or how is the pricing intensity at the moment in the industry?
Well, I think we are maintaining a strong discipline as far as pricing is concerned in India. In Europe, we are seeing slight drop by competition in prices but we are yet to see it is very soon.

Give us a bit more colour in terms of how the capacity utilisation is at this point of time. Do you have plans to increase and expand your capacities? Any capex plan lined up for the next 2 to 3 years?
Today we are really focused on seeing how we can improve our ROCE and our cash flows. So we are going totally capex light for the next 2 to 3 years. We have enough capacity to look after new markets to look after new distributions. Our capacity in Europe was running at around 90% utilization; in India, it is running around 80% utilization.

We have enough capacity. On top of that, what we are trying to do is use digitalization. So using AI and machine learning, getting a lot of data from the equipments to try and see how we can improve our productivity.

Specifically, I will give you an example of our plant in Hungary. We through AI and machine learning and through other engineering processes and manufacturing processes have increased our productivity to 30% more.
So this is where the investment is going into digitalization and to see how we can improve our productivity in all our plants.

So really, there is no plan for any expansions, only looking at debottlenecking, looking at using these tools to try and see how we can increase production in all our categories of products.

Apollo Tyres, of course, apart from digitalization, has also been the front runner when it comes to adoption of sustainability. I was just reading about the tyre which you are making with 75% of recycled material. Give us a bit of sense of where you are in your sustainability timeline and what’s the target?
So our vision is very clear as far as sustainability is concerned, we are looking at becoming carbon neutral by 2050.
In passenger car we have come out with a 75% green tyre. In our agri we have come out with 100% sustainable tyre. So there are a lot of efforts around the company looking at how we can go on the sustainability path.

As far as plants are concerned, we are looking at water consumption, we are looking at carbon emissions, so you have to see that through AI and machine learning also our plants become much more efficient thereby using less energy and therefore giving out less carbon emissions.

As far as products are concerned, we are looking at obviously low rolling resistance, which then contributes to the green energy in the automotive sector. So there is a lot going on. There is a lot of focus on sustainability across the globe for Apollo. And I am happy to say we are going in the right direction as far as sustainable procurement is concerned.

A quick word as to what do you think will be the next big trend to watch out for in the industry and how Apollo Tyres is really gearing up to tap that opportunity.
Well, I think mobility is going through a major shift and Apollo is getting itself up to look after that new change. And mainly it is going to be driven through EV, electric vehicles. Europe has already been in electric vehicles for a very long time, at least for the past 2 to 3 years, India is now coming into electric vehicles. So as far as Apollo is concerned, we are all geared up. We have already come out with products for tackling electric vehicles. We have already launched in Europe and we have launched in India. So we are gearing up ourselves to see mobility and how mobility is going to change as we go along.